Yahoo! Small Business Advisor readers who want to understand "why small business lending is such a confusing mess" will be interested in a new columnist debuted yesterday by The New York Times "You're the Boss" blog.
In the blogger spirit of curating web content, I'll summarize what Ami Kassar says, and point you to his full column for more details and so that you can follow him from here.
The Times' "You're the Boss" blog features 14 writers with various perspectives on "the art of running a small business." Kassar's expertise comes from running a loan broker called MultiFunding that he says has worked to help hundreds of entrepreneurs navigate the capital-seeking process.
Kassar calls the small-business lending market "highly inefficient" and "poorly understood." He explains:
"There are now loan products out there with annual percentage rates of 4 or 5 percent and others as high as 60 or even 80 percent. In part, this is the unintended consequence of the big banks' tightening up their lending; that tightening created a vacuum that has been filled by a whole new world of alternative lending companies that have opened to take advantage of the situation. Many of these alternative lenders are backed by hedge funds that demand high returns. Many small-business owners find dealing with these companies painful, but in many cases they feel they have no choice."
Confusion over what, exactly, a small business is exacerbates the problem, Kassar explains. He points to three drastically different definitions: Big banks say small businesses generate $20 million or less revenue; the Federal Reserve says $50 million or less; and FDIC says small businesses have balances of $1 million or less.
Though he promises to help explain it all, Kassar does not exude optimism. Based on his customers' experiences, he argues that the recession is far from over and does not agree with reports that say the economy is on the mend. He writes, "Working capital is a fight. Banks are not easy to deal with, and fair loans are tough to come by. If you own a retail or service business, it is even harder."
In future posts, Kassar promises to share lessons he's learned through repeatedly trying to help his small business customers get loans at the lowest possible price with the best possible terms. That information sure would be useful to many small business owners. It's a page any small business owner will want to bookmark.